KARACHI: Confirming what has been known as an open secret for months now, the Exchange Companies Association of Pakistan (Ecap) on Monday said that the country has been facing the large-scale outflow of US dollars to Afghanistan ever since the Taliban’s takeover of Kabul last year.

Addressing a presser, Ecap Chairman Malik Bostan noted that this situation had eroded Pakistan’s foreign exchange reserves. The exchange rate has been destroyed by smuggling and fake imports of dollars as well as Islamabad’s negligence towards the issue, he alleged.

Mr Bostan pointed out that when the Taliban took over Kabul, one greenback was available for Rs155 and Pakistan’s reserves stood at $22 billion. Now the reserves have sunk to their lowest level in about eight years with a dollar selling for Rs225 in the inter-bank market. This unhindered flow of the American currency towards Afghanistan has created a crisis for Pakistan, he added.

Mr Malik said that legally 15 million dollars used to cross each day from Pakistan to Afghanistan since Islamabad has permitted each person to take $1,000 per day while 15,000 people regularly travel to the neighbouring country each day.

Islamabad must take up issue with Kabul, says Bostan

He said that two months ago the Kabul regime stated that all Pakistani currency should be converted into dollar or other foreign currencies. Keeping more than 0.5m Pakistani rupee is prohibited in Kabul and any person found with such amount of PKR would be tried under the anti-money laundering laws.

“For 42 years Afghans have been trading in PKR. They have hundreds of billions of PKR. But now they are buying dollars from Pakistan at any cost. They will siphon off the entre dollars from Pakistani markets,” Mr Bostan warned, adding that Pakistan must take up the matter with the Kabul government.

He said commercial banks are buying $120m-$130m per month from exchange companies for credit cards. These cards are legally transferring dollars from the country. However, the government has slashed the annual per card spending limit to $30,000. Earlier, there was no limit on such transaction.

The Ecap chief said that in the first quarter of this fiscal about 15,000 containers left Pakistan without paying import duties. The number of containers was much higher than last year’s figure of 3,000 containers in the same quarter. He said Pakistan imports coal, vegetables, dry fruits and other minerals from Afghanistan which also cost $20m-$25m per day.

“He said the Kabul government has successfully maintained the dollar rate at 88 Afghani and this was due to their policies as they don’t print notes unless and until they get dollars,” he said.

He said exchange companies currently import $3bn through export of other foreign currencies while the remittances amount to $2bn per year. “We can bring $7bn to $8bn per year if the government permits us to have agreements with 50 foreign companies for remittances compared to just 3 we currently have,” he said.

Published in Dawn, December 27th, 2022

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